By Vicki Needham - 01/08/14 08:35 AM EST
Private-sector employers added 238,000 jobs in December, boosted by gains in construction and manufacturing that are signaling a stronger labor market recovery.
The ADP national employment report released Wednesday shows the construction sector added 48,000 jobs while manufacturers hired 19,000 workers, two areas that have struggling to hire during the recovery but have gained some momentum in recent months.
"It appears that businesses are growing more confident and increasing their hiring."
Small businesses, those firms with up to 50 employees, hired 108,000 of the total, outpacing the hiring of medium and large employers, which also added workers to their payrolls last month.
Zandi forecasts that economic growth in the fourth quarter is tracking at around 4 percent, much stronger than he first expected.
That should help boost jobs growth to about 225,000 a month, on average, in 2014, he said.
Despite improvement in the job market, Zandi is backing an extension of emergency federal jobless benefits because the 7 percent unemployment rate is "still very high by historical standards."
He suggests though that Congress should pay for the bill because he doesn't consider the issue to be an emergency any longer.
Zandi's take is that the program should be allowed to fade away, as it was designed to do, as the unemployment rates drop in the states.
He estimates most states, except maybe those like Nevada and Rhode Island that are stuck at much higher rates of unemployment than the national average, might fall out of the program this year, as their jobless rates decline.
Still, while he says the $6.4 billion for three months should be paid for, that demand should not be a precondition to continuing to provide the benefits.
"I think, at this point, lawmakers should work really hard to pay for it over a period of time and get back on track on ensuring whatever changes are made to policy are paid for," he said.
Congressional Republicans insist Congress cover the costs of the bipartisan Senate bill that would provide three additional months to those workers who have been out of work for at least six months.
The Bureau of Labor Statistics report on public and private sector employment due out Friday is expected to come in about 230,000 with around 8,000 job losses across the federal government.
The unemployment rate should hold at 7 percent, although there are economic indicators pointing to another decline.
If that decline doesn't happen in December, Zandi expects to see "meaningful declines in 2014."
The economy mostly weathered the congressional brinkmanship over the debt limit and government shutdown in October, with most of the slowdown early in the final quarter, he said.
But it was a surge in business confidence — it has hit a new record high in the last six to eight weeks — that was the catalyst behind the recent pick up in hiring that is accelerating the recovery.
Overall, Zandi expects the jobless rate to decline at a faster pace in 2014, with a drop to 6.5 percent by year's end. The declines will continue down to 6 percent by the end of 2015, and the economy will return to full employment, about 5.5 percent, at the close of 2016.